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Three thoughts (while waiting for the lights to go out)

Posted by Fred Frailey
on Monday, October 29, 2012

One nice thing about living in western Kansas or Nebraska is that you’ll never lose power due to downed trees. Here in northern Virginia we have trees, lots of them. Any storm worthy of the name topples trees onto power lines and there goes electrical power for a few days. Tonight, with Hurricane Sandy nearing, it’s just a matter of time. So here’s what I’ve been thinking . . .

In hindsight, the disaster that was Canadian Pacific was as plain and stark as a deer in the headlights. Here was a railroad whose standards of performance were clearly inferior to those of all other major North American railroads. Yet its chief executive, Fred Green, was allowed to grasp at straws year after year. And he was defended by many smart people, including Kathryn McQuade, a savvy woman who was CP’s chief financial officer and should have known better. Plus, every last member of CP board of directors publicly endorsed Green even as he kept running the railroad sideways. Four months into the job, Hunter Harrison, Green’s successor, is uprooting the ingrained culture of that proud old railroad. I count nine vice presidents who have left since he showed up. The operating ratio has fallen a full percentage point since Harrison showed up, and the railroad is making do with 30 percent fewer active locomotives than it did a year ago. Why, oh why did it have to fall to a disruptive proxy fight to start righting this listing railroad?

Once upon a time railroads ran in rain and sleet and snow. People depended upon them. They still do, but now the railroads don’t want you to. They quake at the least mention of trouble. Amtrak has folded its cards all over the Atlantic coast starting tonight, but not because of downed electric catenary on the Northeast Corridor or tree-blocked routes of the freight railroads it uses. It’s because this may be a consequence of Hurricane Sandy. For that matter, the entire public transportation grid in the Northeast is frozen — not just Amtrak but the airports and even the New York City and Washington subway and bus routes. Aside from the highways, you cannot move in this region if you want to. And the storm has not even struck. Pretty pathetic, I say. Can’t we at least try?

Amtrak is on a spending spree. According to its July Monthly Performance Report, ticket and beverage revenue is A-OK versus the budget. But the expense side was skewered by an added $136 million in costs the first ten months of fiscal 2012 (which ended September 30). Of that, $107 million was for salaries. The scuttlebutt is that this arose because Amtrak never furloughed the hundreds of workers it hired with economic-stimulus grants to fix Northeast Corridor structures and out-of-service passenger cars. The mechanical and engineering VPs begged to keep them. So how do you balance the books? The same Monthly Performance Report reveals that capital spending has been adjusted downward. Specifically, payments for the 130 new single-level cars and 70 electric locomotives were set back, meaning it appears that deliveries are also set back. Maybe that was going to happen all along, But a little birdie who chirps behind my right ear says no. Thank you, Amtrak, for spending my tax dollars with abandon. — Fred W. Frailey

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